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S.D.N.Y.: Cryptocurrency Purchases Not Necessarily Cash Transactions

August 5, 2019

On Thursday, Judge Katherine Polk Failla issued a decision, Tucker v. Chase Bank USA, N.A., 18 Civ. 3155 (KPF), 2019 U.S. Dist. LEXIS 128834 (S.D.N.Y. Aug. 1, 2019), granting in part and denying in part the Defendant's motion to dismiss. The Plaintiffs used Chase credit cards to purchase cryptocurrencies which Chase categorized as 'purchases' from 2017 to January 2018 and charged at one interest rate, but afterwards as 'cash advances' which were subject to a higher interest rate and transaction fees. The Plaintiffs' suit alleged a breach of contract and violations of the Truth in Lending Act because of Chase's failure to make clear and conspicuous disclosures about which transactions were subject to which rates; its failure to give advance notice of changes in account terms; and its failure to make accurate disclosures in account statements. The advance notice and account statements claims were dismissed, but the others were not.

Chase's contract with the account holders treats, "purchasing travelers checks, foreign currency, money orders, wire transfers or similar cash-like transactions" as cash advances. Id. at *5, quoting Amended Complaint at ¶ 39. The breach of contract claim turns on the interpretation of the term, 'cash-like transaction'. Chase defines this term as being the same as 'money' or a medium of exchange, and crytocurrency can be used as a medium of payment. The Plaintiffs choose to interpret cash as government issued currency. Judge Failla found that the term 'cash-like transaction' should be construed by the terms which proceed it, which are instruments which create legal claims to currency. ". . . Plaintiffs plausibly allege, cryptocurrency does not imbue its holder with a legal right to any government-issued currency, acquisitions of cryptocurrency could not be classified as a cash-like transaction." Id. at *16. The breach of contract claim was not dismissed. The claim under TILA's clear and conspicuous disclosure requirement was also not dismissed because Judge Failla disagreed with Chase's position that, "[c]ryptocurrencies are unambiguously cash-like transactions.". Id. at *17.

The advance notice claim was dismissed because the Plaintiffs failed to allege that a significant change in the disclosed terms occurred - no term of the credit card agreement was changed. The change in classification of cryptocurrency may be a breach of contract, but not change in the disclosed terms. The claim under TILA's accurate periodic statement requirement was also dismissed because these statements do not describe all of the legal duties the parties owe to one another, but only the legal obligation with respect to individual transactions.